Patricia purchased a Personal Auto Policy (PAP). Her car was rear-ended by a driver
who fled the scene. Patricia suffered whiplash, migraine headaches, and she was unable
to work. Which of the following coverages will cover her lost work earnings?
A) medical payments
B) uninsured motorists
C) underinsured motorists
D) bodily injury liability
Which of the following losses to a dwelling would be covered under an unendorsed
Homeowners 3 policy?
A) smoke damage resulting from agricultural operations of a neighboring farmer
B) damage to the structure caused by a flash flood
C) damage to the structure caused by the weight of heavy snow
D) damage to a floor caused by water backing up through a sewer pipe
Which of the following may give rise to imputed negligence?
A) employer-employee relationships
B) injury to a trespasser
C) sole proprietorships
D) attractive nuisance situations
Which of the following statements about a calendar-year deductible is (are) true?
I. It requires the insured to pay a specified amount of each claim regardless of when the
claim occurs during the year and regardless of any previous claims during the year.
II. It is used only in policies which cover direct property losses.
A) I only
B) II only
C) both I and II
D) neither I nor II
The employees of an industrial heating and cooling company spent four days installing
a large gas furnace in a newly-constructed building. While testing the furnace one week
later, an explosion occurred, damaging the building. Damage to the building was
covered under the heating and cooling company’s general liability insurance. When the
heating and cooling company also sought reimbursement for the time its employees
spent installing the furnace, the insurer denied coverage and noted a specific applicable
exclusion. What exclusion denies coverage for such reimbursement?
A) damage to the insured’s product
B) damage to the insured’s work
C) damage to impaired property
D) damage to the insured’s reputation.
Frank’s property insurance requires periodic reporting of inventory values. Frank
believes he can save money by under-reporting the inventory. Last period, Frank
reported $200,000 when the value was really $400,000. Shortly after filing the report,
when the value was $500,000, the inventory was destroyed. How much will Frank’s
insurer pay, assuming no deductible?
A) nothing, as underreporting voids coverage
B) $200,000
C) $250,000
D) $400,000
Which of the following statements is (are) true about longevity insurance?
I. If the annuitant dies during the deferral period, the purchase price of the annuity is
forfeited.
II. Longevity insurance is an example of an immediate annuity.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following losses would be covered under a Commercial General Liability
Policy that has no endorsements?
I. The named insured rented a building and an employee of the named insured
negligently started a fire at the rented building.
II. The cost to recall defective products
A) I only
B) II only
C) both I and II
D) neither I nor II
Reasons for regulation of insurance include which of the following?
I. Maintaining insurer solvency
II. Ensuring reasonable rates
A) I only
B) II only
C) both I and II
D) neither I nor II
Tim purchased a 10-payment whole life insurance policy 15 years ago. Tim would like
to donate this paid-up policy to a charity. Under which policy provision can Tim
transfer all ownership rights in the policy to the charity?
A) absolute assignment
B) extended term nonforfeiture option
C) reinstatement
D) collateral assignment
Mark owns a building that he insured for $90,000. The replacement cost of the building
is $100,000. Mark’s property insurance policy has an 80 percent coinsurance clause and
no deductible. If Mark’s building is destroyed by a covered peril, how much will Mark
receive from his insurer?
A) $80,000
B) $90,000
C) $101,250
D) $112,500
ABC Insurance Company calculated the amount that it expected to pay in claims under
each policy sold. Rather than selling the insurance for the amount it expected to pay in
claims, ABC added an allowance to cover the cost of doing business, including
commissions, taxes, and acquisition expenses. This allowance is called a(n)
A) policyowner dividend.
B) premium.
C) expense loading.
D) rate credit.
Which of the following statements about the use of a captive insurance company by a
parent firm is true?
A) The captive may not write outside, non-parent company, business.
B) Captives are not permitted to use reinsurance, so any business insured by the captive
stays with the captive.
C) The captive may be used to insure loss exposures that the parent firm is finding
difficult to insure with private insurers.
D) Business placed with the captive is always considered retained risk and is never
considered transferred risk.
The exclusion of flood in a homeowners policy is an example of an
A) excluded activity.
B) excluded condition.
C) excluded property.
D) excluded peril.
All of the following are additional coverages under Section I of the Homeowners 3
policy EXCEPT
A) the reasonable expenses of removing debris of covered property after an insured
loss.
B) fire department service charges for which the insured is liable by contract or
agreement.
C) damage to trees and shrubs caused by a windstorm.
D) losses incurred from the unauthorized use of a stolen credit card.
All of the following statements about aviation insurance are true EXCEPT
A) Physical damage coverage can be written on an “all-risks” basis.
B) Liability coverage also applies to bodily injury arising out of the premises where the
aircraft is stored.
C) Liability coverage applies to liability arising out of a workers compensation law.
D) Aviation insurance is a highly-specialized market with relatively few insurers.
Tenth National Bank extended a $2 million loan to ABC Development Company. Tenth
National accepted a mortgage on a building as collateral for the loan. The mortgagee’s
signature on the loan, however, was a forgery. The resulting loss is covered by which
financial institution bond coverage?
A) Insuring Agreement A – Fidelity
B) Insuring Agreement D – Forgery or Alteration
C) Insuring Agreement E – Securities
D) Insuring Agreement G – Fraudulent Mortgages
The worst loss that could ever happen to a firm is referred to as the
A) maximum possible loss.
B) probable maximum loss.
C) frequency of loss.
D) severity of loss.
Which of the following statements about the characteristics of current no-fault laws is
true?
A) Most laws in force today are pure no-fault laws.
B) Most laws apply to both bodily injury and property damage.
C) Most laws permit payment of survivor benefits to a surviving spouse and children.
D) States with add-on plans restrict the right of accident victims to sue negligent
drivers.